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Govt approves the supply of cheap LNG for power plants

26 Mar 2015 Evaluate
The union Cabinet, with a view to improve the power situation in the country has approved the supply of cheap liquefied natural gas (LNG) for power plants, it will help to rescue investments worth Rs 60,000 crore that was on the verge of sinking because of fuel scarcity. 31-gas fired power plants that have been lying idle for a while now and for which the government has squarely blamed the fall in output from the KG-D6 field of Reliance Industries, may get out of their misery with the new policy.

As per the new formula, pooling of imported gas and domestic gas for gas based power plants has been approved. The formula incorporates support from pipeline companies such as GAIL which have agreed for a cut in pipeline tariff and marketing margins. Gas transporters and re-gasification terminals have agreed to reduce their transportation tariff, marketing margin and re-gasification charges on the incremental RLNG (Re-Gasified Liquefied Natural Gas). On the other hand, State governments have agreed on a cut in duties on gas and will provide a subsidy up to the power tariff of Rs 5.5 per unit for purchasing gas based power.

Piyush Goyal, Union minister for power and coal has further elaborated that companies that need fuel will compete in a reverse auction by bidding the lowest amount of subsidy they need to supply electricity at Rs 5.50 per unit. The ministry has also decided that gas-based power plants will be allowed to run at 30 per cent capacity by using expensive imported gas. However, no changes would be made in the existing allocation of natural gas.

The government will organise a reverse bidding process in the next 30-35 days, while an empowered committee will have the power to revise the power purchase price as well as the limit to which the plant load factor of the subsidised plants can be increased after an initial assessment of the requirements at the plants is made.

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